Tel Aviv stocks drop and shekel slides as election results dent hopes for change

Tel Aviv shares fell and the shekel weakened sharply after near-final election results showed no clear winner, with the right-wing bloc led by Netanyahu taking 53 seats and Yashar's Eisenkot bloc 48, short of the 61 needed for a Knesset majority. The TA-125 closed down 2.5% and the shekel lost 2.2% against the dollar, reversing pre-vote gains as uncertainty over Israel's next government rattled markets.

Tel Aviv shares lost ground and the shekel weakened sharply against the dollar on Wednesday, as non-final election results thwarted investors' bets on a change in government and left open who will lead Israel next. With over 85 percent of votes counted, partial results from the Central Elections Committee gave 53 seats to the right-wing bloc led by incumbent Prime Minister Benjamin Netanyahu and 48 to the bloc led by Yashar's Gadi Eisenkot. Neither is close to the 61 seats needed for a majority in the 120-seat Knesset. Final results were expected Thursday or Friday. The benchmark TA-125 index fell 2.5% at the close and the TA-35 index of blue-chip companies lost 1.8%. The TA-90 index plunged 4.5%, the TA-Insurance index sank 5.2% and the TA-Construction index tumbled 8.8%. The shekel lost 2.2% against the US dollar, trading around NIS 3.1216 per dollar and headed for its weakest close in more than six months. The sell-off reversed pre-vote gains, when shares rose about 2% on Monday and the shekel strengthened on Tuesday. The Tel Aviv Stock Exchange was closed Tuesday for election day. "There is a bit of a disappointment because the market was pretty confident that the election was going in one direction," Citi Israel CEO Neil Corney told The Times of Israel, saying investors expected a government of change to reopen peace accords and remove sanctions implications. "Now markets are faced with uncertainty and there is probably not going to be certainty for the next two months." If neither candidate can assemble a majority, another election is the most likely outcome, with Netanyahu remaining at the helm of a caretaker government. Israel held four elections between 2019 and 2021 before a government was formed, which collapsed in 2022. Ronen Menahem, chief markets economist for Mizrahi Tefahot Bank, said investors will want a "stable coalition which will be able to drive fiscal policy and make budgetary priorities that support economic growth." The article notes criticism of the outgoing government over earmarks for special interests, insufficient support for reservists and damage to Israel's image abroad, and says concerns about democratic instability have driven an exodus of skilled professionals.